Statistical forecasting:
notes on regression and time series analysis


Robert Nau

Fuqua School of Business

Duke University



This web site contains notes and materials for an advanced elective course on statistical forecasting that is taught at the Fuqua School of Business, Duke University. It covers linear regression and time series forecasting models as well as general principles of thoughtful data analysis. The time series material is illustrated with output produced by Statgraphics, a statistical software package that is highly interactive and has good features for testing and comparing models, including a parallel-model forecasting procedure that I designed many years ago. The material on multivariate data analysis and linear regression is illustrated with output produced by RegressIt, a free Excel add-in developed more recently which offers presentation-quality graphics and support for good modeling practices. However, these notes are platform-independent. Any statistical software package ought to provide the analytical capabilities needed for the various topics covered here.

1.  Get to know your data

Principles and risks of forecasting (pdf)
Famous forecasting quotes
How to move data around
Get to know your data
Inflation adjustment (deflation)
Seasonal adjustment
Stationarity and differencing
The logarithm transformation

2.  Introduction to forecasting: the simplest models

Statistics review and the simplest forecasting model: the sample mean (pdf)
Notes on the random walk model (pdf)
Mean (constant) model
Linear trend model
Random walk model
Geometric random walk model
Three types of forecasts: estimation period, validation period, and the future

3.  Averaging and smoothing models

Notes on forecasting with moving averages (pdf)
Moving average and exponential smoothing models
Slides on inflation and seasonal adjustment and Winters seasonal exponential smoothing
Spreadsheet implementation of seasonal adjustment and exponential smoothing
Equations for the smoothing models (SAS web site)

4.  Linear regression models

Notes on linear regression analysis (pdf)
Introduction to linear regression analysis

Mathematics of simple regression
Regression examples

- Baseball batting averages

- Beer sales vs. price, part 1: descriptive analysis

- Beer sales vs. price, part 2: fitting a simple model

- Beer sales vs. price, part 3: transformations of variables

- Beer sales vs. price, part 4: additional predictors

- NC natural gas consumption vs. temperature (new! 10/2/2015)

What to look for in regression output
What's a good value for R-squared?
What's the bottom line? How to compare models
Testing the assumptions of linear regression
Additional notes on regression analysis
Stepwise and all-possible-regressions
Excel file with simple regression formulas
Excel file with regression formulas in matrix form

If you are a PC Excel user, you must check this out:
RegressIt: free Excel add-in for linear regression and multivariate data analysis

5.  ARIMA models for time series forecasting

Notes on nonseasonal ARIMA models (pdf)
Slides on seasonal and nonseasonal ARIMA models (pdf)
Introduction to ARIMA: nonseasonal models
Identifying the order of differencing
Identifying the orders of AR or MA terms
Estimation of ARIMA models
Seasonal differencing
Seasonal random walk: ARIMA(0,0,0)x(0,1,0)
Seasonal random trend: ARIMA(0,1,0)x(0,1,0)

General seasonal ARIMA models: ARIMA(0,1,1)x(0,1,1) etc.
Summary of rules for identifying ARIMA models
ARIMA models with regressors
The mathematical structure of ARIMA models (pdf)

6.  Choosing the right forecasting model

Steps in choosing a forecasting model
Forecasting flow chart
Data transformations and forecasting models: what to use and when
Automatic forecasting software
Political and ethical issues in forecasting
How to avoid trouble: principles of good data analysis

7.  Statistics resources on the web

Forecasting Principles and Practice (R-based on-line textbook by Rob Hyndman and George Athanasopoulos)
Stat 510: Applied Time Series (R-based on-line course at Penn State)
Online StatBook (David Lane)
International Institute of Forecasters links (sites, references, software)
Forecasting Principles web site (J. Scott Armstrong and Kesten Green)
HyperStat Online web site (David Lane)
Institute for Digital Research and Education at UCLA
Statsblogs (links to many blogger sites)
StatPages web site (John Pezzullo)
StatSci web site (Gordon Smyth)
Talk Stats forum
StackExchange Cross-Validated forum


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